MoneyGram 2010 Annual Report Download - page 96

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company has no obligation to Walmart or additional obligations to the Investors under the terms of the Participation Agreement.
However, as the Company indirectly benefited from the agreement, the Company recognizes the Participation Agreement in its
consolidated financial statements as if the Company itself entered into the agreement with Walmart. As Walmart may elect to receive any
payments under the Participation Agreement in cash, the agreement is accounted for as a liability award. The Company will recognize a
liability equal to the fair value of the Participation Agreement through a charge to the Consolidated Statements of Income (Loss) based
upon the probability that certain performance conditions will be met. The liability will be remeasured each period until settlement, with
changes in fair value recognized in the Consolidated Statements of Income (Loss). Walmart's ability to earn the award under the
Participation Agreement is conditioned upon the Investors receiving cash payments related to the Company's preferred stock in excess of
the Investors' original investment in the Company. While it is probable that performance conditions will be met at December 31, 2010,
the fair value of the liability is zero at this time as the Company's discount rate, based on contractual debt and equity rates of returns and
implied market premiums, exceeds the dividend rate on the preferred stock.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation — The consolidated financial statements of MoneyGram are prepared in conformity with accounting principles
generally accepted in the United States of America ("GAAP"). The Consolidated Balance Sheets are unclassified due to the short-term
nature of the settlement obligations, contrasted with the ability to invest cash awaiting settlement in long-term investment securities.
During the fourth quarter of 2010, the Company revised the presentation of its Consolidated Statements of Income (Loss) as a result of an
internal review to enhance external reporting and management reporting. As a result of this review, the Company will no longer present
net revenue, previously measured as total revenue less total commissions expense, as this measure was not found to be a meaningful
metric internally or to our external users. The Company will continue to separately disclose "Commissions expense." The Company has
also presented an operating income measure consistent with management reporting and to more clearly delineate operating and non-
operating items. As a result, certain items are now presented below the operating income line based on management's assessment of their
nature as non-operating, including securities (gains) losses, interest expense and (gains) losses related to cash flow hedges. In the
Consolidated Balance Sheets, the Company has reclassified amounts related to intangible assets into "Other assets" due to immateriality.
In the Consolidated Statements of Cash Flows, the Company has separately broken out "Signing bonus payments," which were
previously included in "Change in other assets," to enhance transparency. All prior periods have been reclassified to conform to this new
presentation.
Correction of Presentation of Short-term Investments — The Company has corrected the presentation of certain investments in time
deposits and certificates of deposit in the 2009 and 2008 consolidated financial statements, reflecting the fact that these investments have
original maturities in excess of three months but no greater than thirteen months. In the accompanying Consolidated Balance Sheet as of
December 31, 2009, $400.0 million of investments previously presented as "Cash and cash equivalents (substantially restricted)" have
now been properly presented as "Short-term investments (substantially restricted)." In addition, the related gross purchases and gross
maturities of such short-term investments, previously presented net within "Change in cash and cash equivalents (substantially
restricted)" in operating activities, have been properly presented as cash flows from investing activities in the 2009 and 2008
Consolidated Statements of Cash Flows.
Principles of Consolidation — The consolidated financial statements include the accounts of MoneyGram International, Inc. and its
subsidiaries. Inter-company profits, transactions and account balances have been eliminated in consolidation. The Company participates
in various trust arrangements (special purpose entities or "SPEs") related to official check processing agreements with financial
institutions and structured investments within the investment portfolio.
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